If there’s one thing certain in life it’s change. And generally your attitude towards saving and investing will change as you get older.
How your super is invested when starting your first job may not be the right approach when you’re approaching retirement. Luckily you can change your investment options at any time and this could make a real difference to how much money you have when you retire.
There are usually several different investment options to choose from. If you haven’t selected an investment option, you’re probably invested in your fund's default option, which will generally take a balanced approach to risk and return.
To get up to speed on your super investment options, we’ve answered three common questions: how your money is invested, the different options available, and how your stage of life may influence your preferences.
Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%. Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.
Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.
If you’re not sure what you’re invested in, contact your super fund. You may also be able to see your current investment option by logging into your super fund’s online portal – this may also give you a current balance and other information such as your projected super savings over a lifetime.
Most super funds let you choose from a range, or mix of investment options and asset classes. These might include 'growth', 'balanced', 'conservative' and 'cash' but the terms can differ across super funds. Here’s a small sample of the typical type of investment options available:
Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions. It could be a good idea to consider factors such as your current stage in life, and future plans and goals before choosing the super investment option that’s right for you.
Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.
If you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.
If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.
While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.
Need some help working out the best option for you?
Article by - AMP Life Limited. First published December 2019.
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.